EUR/USD soars as Danske raises estimate to 1.1500 ahead of ECB

The EUR/USD pair is up by more than 0.50% as traders refocus on the ECB monetary policy meeting, inflation data, rising number of coronavirus cases, and Friday’s eurogroup meeting. The pair is trading at 1.1360, which is higher than the intraday low of 1.1300.

Optimism on the euro remains

The EUR/USD pair rose as more investors remained optimistic about the euro. On Friday, data from CFTC showed that the speculative net position on the currency rose to 103.6k from 99k in the futures market.

In a report released yesterday, analysts at Danske Bank also sounded optimistic about the euro. They now expect the EUR/USD pair to hit 1.15, which is a ~2% gain from the current level. They wrote:

“In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg. We remain constructive and expect the broad USD to decline over the coming months. In turn, our 3M forecast is 1.15.”

The same sentiment was echoed by analysts at ING. In a report, analysts at ING said:

“The EUR is therefore consolidating its role as the most overbought currency in the G10 ahead of a busy period in the eurozone.”

Eurozone recovery fund eyed

The biggest mover for the EUR/USD this week will not be the ECB interest rate decision on Thursday. This is because analysts expect the central bank to do little in this meeting. With the Eurozone economy improving, analysts expect the central bank to leave interest rate unchanged. Christine Lagarde will also express caution about the ongoing recovery and announce a continuation of QE.

Therefore, according to ING, the biggest mover will be the upcoming Eurogroup meeting that will happen in Brussels. In this meeting, the members will have a candid discussion about the €750 billion recovery fund that was proposed two months ago.

The biggest challenge for the recovery fund is that some countries have opposed the size and nature of the fund. The countries, christened as the frugal four, have opposed giving countries the funds as grants. Instead, they have suggested that the funds be given out in form of low-interest loans. Countries like Italy, France, Spain, and Germany have supported giving out grants. According to ING, a deal on financing will be a positive thing for the euro.

Other than the recovery fund, other things that will move the EUR/USD pair will be the number of coronavirus cases in the US, inflation data, and earning season. The number of COVID-19 cases has been rising, raising the likelihood of negative rates in the US, which is negative for the US dollar.

EUR/USD technical outlook

The EUR/USD pair is trading at 1.1365, which is a few pips below last Thursday’s high of 1.1375. On the daily chart, the price is inches above the 78.6% retracement and higher than the 50-day and 100-day EMAs. It is also slightly above the ascending purple trend line. Further, the chart shows that the price failed to break out below 1.1167. Therefore, I expect the upward trend will continue as bulls attempt to move past June’s high of 1.1425.